USD: Upside risks build on data and geopolitics – OCBC

OCBC strategists Sim Moh Siong and Christopher Wong highlight that recent US labour data and escalating Middle East tensions are supporting the Dollar. Stabilising jobless claims and sharply lower Challenger layoffs precede a key payrolls release that could shift the Federal Reserve toward a more symmetric stance. A stronger-than-expected jobs report is seen as potentially alleviating US growth concerns and underpinning USD strength.

Jobs data and energy shock support USD

"While geopolitics has dominated market attention, recent US data also point toward potential USD upside. Challenger job cuts fell 72% YoY to 48.3k in February, with the 12-month moving average easing to 93.1k. Initial jobless claims held steady at 213k—slightly below expectations—underscoring stabilising labour market even though hiring remains soft."

"Attention now shifts to today’s employment report, where consensus looks for a 55k rise in nonfarm payrolls and an unchanged 4.3% unemployment rate. A stronger-than-expected print would likely alleviate US growth concerns despite lingering risks from elevated energy prices. Conversely, a miss could amplify growth worries more than in previous months, given the added uncertainty around energy markets and AI-related disruption."

"Stabilising labour data and the potential for payrolls print beat could tilt the Fed toward a more balanced policy stance. Markets may be underestimating USD-supportive risks if today’s jobs report beats expectations."

"A sufficiently strong payrolls number may push the Fed toward a more symmetric policy stance—signalling that its next move could be either a cut or a hike. That would mark a shift from the recent easing bias and would be supportive of the USD, especially if the report helps dispel persistent fears of labour market deterioration."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)